EU summit on the financial market: “The banking system in Europe is stable”

Inflation, tumbling banks, falling share prices. The financial market faces challenges. At the EU summit, Chancellor Scholz and other heads of government spread the message that the system was stable.

In view of the troubled banks in the USA and Europe, the heads of state and government of the EU countries tried to calm the financial markets at their summit in Brussels. They demonstratively emphasized the crisis resilience of the system. The banking system in Europe is very stable and resilient, declared Chancellor Scholz after the meeting in Brussels. The EU has established strict rules for supervision.

Strict rules after the financial crisis

The Chancellor demonstratively expressed his confidence in Deutsche Bank after the shares had fallen by more than eleven percent. “There is no reason to worry about anything,” said Scholz. Deutsche Bank has fundamentally modernized and reorganized its business model and “is very profitable”.

French President Emmanuel Macron blamed “speculators” for the recent downturn on the stock exchanges and emphasized: “The euro zone is the region where the banks are the most solid.” We have learned from past crises, said the French President.

The President of the European Central Bank, Christine Lagarde, who attended the EU summit, made a similar statement. According to participants, the banking sector is strong and resilient, which has also been helped by the reforms of banking supervision initiated after the global financial crisis. The tool box is also fully equipped to provide the financial institutions with liquidity support if necessary, according to the ECB President.

Stability can quickly become lopsided

Belgian Prime Minister Alexander De Croo also stressed before the summit that there was currently no reason for concern. “But of course none of us could have imagined a few weeks ago that the US Silicon Valley Bank and Credit Suisse in Switzerland could get into such serious difficulties,” he says.

This shows that financial stability can quickly get into trouble. Even if the banks are looking good with their capital and liquidity positions at the moment – nobody knows what could happen next, the Belgian continued.

Call for implementation of the banking union

It is possible that the increasing turbulence in the banking sector will give impetus to a project that has been debated for a long time. It’s about the European banking union. Progress is finally needed, demanded Paschal Donohoe, who as head of the so-called Eurogroup represents all EU countries with the common currency.

Thanks to the measures taken so far, the banking sector is proving to be very resilient. In view of the challenges, this must be continued. “Last summer, the Eurogroup agreed to complete the banking union. I expect that the EU Commission will present corresponding plans very soon. We now have to implement what we have agreed.”

Banking union can make all the difference in strengthening the euro area banking system, Donohoe said. So far, the plans for a banking union have failed due to the common European deposit guarantee system, which Germany has also spoken out against.

With information from Matthias Reiche, ARD studio in Brussels.